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The Hidden Disruptor: Blockchain

By Dr. Olav Laudy, Chief Data Scientist, APAC, IBM

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Dr. Olav Laudy, Chief Data Scientist, APAC, IBM

“Disruptive innovation” is a term frequently mentioned by consultants. They subsequently point to companies being hugely successful and articulate the value of technology behind those successes. However, investing in those technologies always makes you a follower instead of a leader, and hence your innovation will not disrupt anymore. Disruptive innovation is characterized by the fact that a new technology has applications that nobody sees coming. A newcomer in the market smartly uses this technology and disrupts established order. Blockchain has the full potential to be one of those technologies.

Blockchain is mostly associated with the Bitcoin, an experimental crypto-currency being left alone by CXOs due to its technical complexity and its uncertain financial status. However, Blockchain is radically different from the Bitcoin. Blockchain is a distributed database that maintains a continuously-growing list of data records secured from tampering and revision. “Distributed” means: there are 1000’s of copies of this database (spread all over the internet) and the Blockchain technology allows them to be in sync all the time. “Secured from tampering and revision” means: any change in a once established transaction record will automatically invalidate that copy (chain) of the database. Since the database is distributed, any user is allowed to connect to this database in order to send new transactions to it or verify transactions. Harder to grasp is the concept that those transactions can consists of programs: transactions causing a computer to perform indicated tasks according to encoded instructions. In the next decade, Blockchain will touch every industry, turning markets upside down. A few examples:

“Blockchain is a distributed database that maintains a continuously-growing list of data records secured from tampering and revision.”    

Banks earn money by the interest difference between loans and deposits. This disrupts when Blockchain makes every person a small bank. Anyone with a surplus of money can offer to loan this out against preset conditions and the loaning customer collects many small loans into one desired amount. The innovator: a company with an app that creates a credit score that links into the Blockchain programs. The smart contract is born.

Taking this further, mobile technology allows any payment to be done with the Blockchain without mediation of the bank. In order for banks to survive, they will need to change into identity services: linking a physical person to his virtual possessions. The innovator:  Companies that uses Blockchain to store persistent physical characteristics and allows  verifying this identity at appropriate levels of matching (DNA-fingerprint-facial recognition) depending on the importance of the transaction.

Energy suppliers earn money by exchanging it for electricity. Energy consumers increasingly become energy producers: not only does solar energy become a viable source, companies have energy surplus due to their production processes. Rather than wasting this, or storing this for their own use later, a smart contract allows them to automatically trade this surplus on the energy market. The innovator: a company allowing end-users to send energy into the grid and facilitating autonomous energy trading by leveraging the distributed ledger: Blockchain.

As a CXO, now it is the time to take appropriate action. Blockchain needs to be discussed in dedicated workgroups in order to understand technologyand create use-cases. The first commercially applicable Blockchain APIs become available. Organizing hackathons may be an interesting way to take a use-case forward toward prototype applications. Disruptive innovation: It starts with something nobody sees coming and for the Blockchain the time is now.

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